Institutional investors’ interest in cryptocurrency is on the rise
26th January, 2019
2018 was a difficult year in terms of cryptocurrency market growth and valuation, but it also provided a strong foundation for the future development of the cryptocurrency industry. The biggest and most encouraging trend is the increased institutional investors’ involvement. According to a Bloomberg report the institutional investors have surpassed high-net-worth individuals as the largest buyers of digital token packages valued at more than $100,000 and through private transactions (also called over-the-counter). This shift is evidenced by data showing cryptocurrency exchanges’ volumes falling more precipitously from previous high points in the digital currency market when compared against the over-the-counter (OTC) market.
The newly bolstered institutional interest in the cryptocurrency market is coming from few different directions. 2018 saw the arrival of institutional investment services like Bakkt and Fidelity. The growing number of crypto hedge fund launches has testified that there is a stable demand among the institutional investors. The endowments of several high-profile institutions, including Harvard University, MIT, Stanford University, Yale University, Dartmouth College, and the University of North Carolina have spread their risks into at least one cryptocurrency fund.
As a result of the new interest among institutional investors, there are also new products, services, and methods for transacting. Private sales are gaining traction because they can facilitate larger transactions that are otherwise difficult to complete on exchanges. They also allow transacting partners to fix the price ahead of time. Coinbase recently announced that select customers will gain access to Coinbase Custody and Coinbase’s over-the-counter (OTC) trading desk, which launched in the U.S. last year. With that move Coinbase is looking to establish itself as a major player for institutional bitcoin and cryptocurrency trading as the likes of Hong Kong-based Binance continue to expand internationally. Miners have also taken to professionalizing their modes of transacting, setting up regular coin sales via their own liquidity desks, while they previously may have waited for a market rally to sell a supply of tokens on an external exchange.
Why are institutional investors once weary to approach the cryptocurrency market are now deciding to dive in? The answer might have something to do with volatility. The digital currency space has settled down in the recent months and the tighter trading range might be soothing the fear of the traditional financial institutions. But the greatest barrier to wide scale institutional investing remains. Once there is a legal definition of crypto assets and regulated and trustworthy channels for cryptocurrency investing, the sky will be the limit to the institutional investments in the digital assets market.